Shri Abhinav Ajmera, New Delhi V. ACIT, New Delhi

ITA 2766/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5745 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-02-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK DITDR
• Keywords: Capital asset; Earning of tax free income; Cost of acquisition; Capital receipt
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.2766/DEL./2009 (ASSESSMENT YEAR : 2006-07) SHRI ABHINAV AJMERA, VS. ACIT(OSD), WARD 37(2), S/O LEGAL HEIR OF LATE SH. D.C. JAIN, NEW DELHI. PROP. D.C. JAIN & ASSOCIATES, 58, BAHUBALI ENCLAVE, VIKAS MARG EXTN., NEW DELHI. (PAN/GIR NO.AAEPJ0086D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.P. RASTOGI, ADV. REVENUE BY : MS. PRATIMA KAUSHIK, DIT(DR) ORDER PER A.K. GARODIA, AM THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF CIT(A)-XXVIII, NEW DELHI DATED 19.03.2009 FOR AY 2006-07. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. THAT THE AUTHORITIES BELOW OUGHT NOT TO HAVE AS SESSED THE AMOUNT OF RS.10,03,814/- BEING THE SALE PROCEEDS OF AGRICULTU RE CROPS, HORTICULTURE AND TREES OF FRUITS AND OTHERS UNDER THE HEAD CAPI TAL GAINS, BUT SHOULD HAVE CONSIDERED AS AGRICULTURAL INCOME. 2. THAT THE APPELLANT DENIES ITS LIABILITY TO PAY I NTEREST U/S 234B OF THE I.T. ACT AT RS.20,038/-. 2. BRIEF FACTS ARE THAT IN THE PRESENT CASE, THE AS SESSEE IS A CHARTERED ACCOUNTANT BY PROFESSION AND IN THE PRESENT YEAR, THE ASSESSEE HA S SOLD LAND IN THE PRESENT YEAR AND HAS CLAIMED RS.14.92 LAKHS AS EXPENSES FROM THE SALE CO NSIDERATION AND ALSO CLAIMED RS.10 LAKHS AS EXEMPT AS AGRICULTURE INCOME ALTHOUGH THIS AMOUNT IS PART OF SALE DEED AS PER WHICH THE LAND WAS SOLD. THE AO CONFRONTED THE ASS ESSEE REGARDING HIS CLAIM THAT RS.10 LAKHS IS EXEMPT INCOME. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT THE ITA NO.2766/DEL./2009 (AY : 2006-07) 2 VENDEE HAS PAID A SUM OF RS.10 LAKHS FOR THE TOTAL REIMBURSEMENT OF ALL THE TREES, PLANTS AND OTHER EXISTING CROPS AND HORTICULTURE AND THE S AME IS INCLUDED IN THE TOTAL SALE VALUE. IT IS OBSERVED BY THE AO ON PAGE 2 OF THE ASSESSMEN T ORDER THAT THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED BECAUSE THIS IS A COMPO SITE SALE ALONG WITH LAND AND HENCE IT CANNOT BE TREATED SEPARATELY AS AGRICULTURAL INCOME . THE AO HAS ALSO STATED THAT THIS VIEW IS SUPPORTED BY THE JUDGMENT OF HONBLE APEX COURT, RENDERED IN THE CASE OF GOKUL RUBBER TEA PLANTATION VS. CIT AS REPORTED IN 172 IT R 197. THE AO MADE ADDITION OF RS.10,03,814/-. BEING AGGRIEVED, THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE CIT(A), BUT WITHOUT SUCCESS. THE CIT(A) HAS CONFIR MED THE ASSESSMENT ORDER AND HE HAS ALSO FOLLOWED THE JUDGMENT OF THE HONBLE KERALA HI GH COURT RENDERED IN THE CASE OF TRAVANCORE TEA CO. LTD. VS. CIT, REPORTED IN 93 ITR 314. HE ALSO FOLLOWED THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF COMMI SSIONER OF AGRICULTURAL INCOME TAX VS. KAILASH RUBBER & CO., AS REPORTED IN 60 ITR 434 AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. LD.AR OF THE ASSESSEE DRAWN OUR ATTENTION TO TH E COPY OF SALE DEED AS AVAILABLE ON PAGES 23-81 OF THE PAPER BOOK AND IN PARTICULAR OUR ATTENTION WAS DRAWN PAGE 77-79 OF THE PAPER BOOK AS PER WHICH IT IS CLAIMED THAT THE VENDEE HAS PAID TO THE VENDOR A SUM OF RS.10 LAKHS FOR TREES ETC. WHICH IS INCLUDED IN TOT AL SALE VALUE AND THIS ESTIMATION OF RS.10 LAKHS IS TOWARDS REIMBURSEMENT OF TREES AND P LANT AND EXISTING HORTICULTURE. IT IS SUBMITTED BY THE LD.AR OF THE ASSESSEE THAT SINCE S EPARATE AMOUNT WAS PAID BY THE VENDEE TO THE ASSESSEE ON ACCOUNT OF TREES, PLANT A ND HORTICULTURE, THE SAME IS AGRICULTURAL INCOME. IN REPLY TO A QUERY FORM THE BENCH, IT WAS SUBMITTED BY THE LD.AR OF THE ASSESSEE THAT TREES AND PLANTS WERE EXISTING AT TH E TIME OF PURCHASE OF THIS LAND BY THE DECEASED FATHER OF THE ASSESSEE. RELIANCE WAS ALSO PLACED BY HIM ON THE FOLLOWING JUDGMENTS: (A) CIT VS. VIMAL CHAND GOLE CHAND, 201 ITR 212(RA J.) (B) CIT VS. DR. D.L. RAM CHANDRA RAO, 236 ITR 51 ( MAD.) (C) CIT VS. SUMAN TEA & PLYWOOD INDUSTRIES PVT. LT D., 226 ITR 34 (CAL.) (D) 241 ITR 591 (MAD.) (NO CITATION IS REPORTED AT PAGE 591 OF ITR 241) 4. REGARDING THE JUDGMENTS REFERRED TO BY THE AO AN D BY THE CIT(A), IT WAS SUBMITTED THAT THESE JUDGMENTS ARE NOT APPLICABLE I N THE PRESENT CASE BECAUSE THE FACTS ARE ITA NO.2766/DEL./2009 (AY : 2006-07) 3 DIFFERENT. IT IS ALSO SUBMITTED BY HIM THAT THE CO ST OF TREES IS NOT ASCERTAINABLE AND HENCE THE SALE PROCEEDS OF TREES CANNOT BE SUBJECTED TO T AX. RELIANCE WAS ALSO PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF SURENDER SINGH VS. DCIT, ITA NO.604/DEL./2000 DATED 11.12.2003. HE SUBMITTED A COPY OF THIS TRIBUNAL DECISION. IT WAS SUBMITTED THAT IN THIS CASE, THE ISSUE IN DISPU TE WAS REGARDING SALE PROCEEDS OF OLD MANGO TREES AND IT WAS HELD BY THE TRIBUNAL THAT TH E SALE PROCEEDS OF OLD MANGO TREES IS NOT LIABLE TO TAX AS CAPITAL GAINS. AS AGAINST THI S, IT WAS SUBMITTED BY THE LD.DR OF THE REVENUE THAT IN THE CASE OF SHRI SURENDER SINGH (SU PRA), THERE WAS NO COMPOSITE SALE OF TREES WITH LAND WHEREAS IN THE PRESENT CASE, THERE IS COMPOSITE SALE OF LAND ALONG WITH TREES AND HENCE THIS TRIBUNAL DECISION IS NOT APPLI CABLE IN THE PRESENT CASE. RELIANCE WAS ALSO PLACED BY HIM ON THE FOLLOWING JUDGMENTS: (A) COMMISSIONER OF AGRICULTURE INCOME-TAX, KERALA VS. KAILASH RUBBER & CO., 60 ITR 435 (SC) (B) CIT VS.M.P. AUDYOGIK KENDRA VIKAS NIGAM (RAIPUR ) LTD., 227 ITR 799(M.P) 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT IN THE PRESENT CASE, THE LAND IN QUESTION WAS PURCHASED BY THE DECEASED FATHER OF THE ASSESSEE SHRI D.C. JAIN IN THE YEAR 1981. IT WAS ADMITTED B Y THE LD.AR OF THE ASSESSEE IN REPLY TO A SPECIFIC QUERY FORM THE BENCH THAT THESE TREES WE RE EXISTING EVEN AT THE TIME OF PURCHASE OF LAND BY THE DECEASED FATHER OF THE ASSESSEE AND HENCE THE COST PRICE OF THE LAND ALSO INCLUDE THE COST OF SUCH TREES WHICH WAS EXISTING O N THE LAND AT THE TIME OF ITS PURCHASE BY THE DECEASED FATHER OF THE ASSESSEE. IN THE LIGHT OF THESE FACTS, NOW WE EXAMINE THE VARIOUS JUDGMENTS CITED BY BOTH THE SIDES. THE AO HAS REFERRED TO THE DECISION OF THE HONBLE KERALA HIGH COURT RENDERED IN THE CASE OF G OKUL RUBBER AND TEA PLANTATION LTD.(SUPRA). IN THIS CASE, THE DISPUTE WAS REGARDI NG TAXABILITY OF THE SALE PROCEEDS OF RUBBER TREES CUT AND SOLD BY THE ASSESSEE. IN THAT CASE, IT WAS ALSO HELD BY THE TRIBUNAL THAT SUCH SALE PROCEEDS OF RUBBER TREES IS LIABLE T O TAX AS CAPITAL GAINS. THE HONBLE KERALA HIGH COURT HAS UPHELD THIS TRIBUNAL DECISION AND HENCE THIS JUDGMENT OF HONBLE KERALA HIGH COURT SUPPORTS THE CASE OF THE AO. THE CIT(A) HAS FOLLOWED ANOTHER JUDGMENT OF KERALA HIGH COURT RENDERED IN THE CASE OF TRAVANCORE TEA ESTATES CO. LTD. VS. CIT (SUPRA), IT WAS HELD BY KERALA HIGH COURT IN THIS CASE THAT TREES THAT STOOD ON ITA NO.2766/DEL./2009 (AY : 2006-07) 4 AGRICULTURAL LAND IN INDIA MENTIONED IN SECTION 2 (14)(III) IS NOT AGRICULTURAL LAND IN INDIA AND, THEREFORE, PROPERTY OF ANY KIND WHICH W ILL BE CAPITAL ASSET. AFTER HOLDING SO, IT WAS ALSO HELD THAT PROFITS AND GAINS ARISING FROM THE TRANSFER OF SUCH CAPITAL ASSET ARE TAXABLE U/S 45 OF THE I.T. ACT, 1961. THIS JUDGMEN T OF HONBLE KERALA HIGH COURT ALSO SUPPORTS THE CASE OF THE REVENUE. ANOTHER JUDGMENT FOLLOWED BY THE CIT(A) IS THE JUDGMENT OF HONBLE APEX COURT, RENDERED IN THE CA SE OF COMMISSIONER OF AGRICULTURAL INCOME-TAX, KERALA VS. KAILASH RUBBER & CO. LTD. (S UPRA). IN THAT CASE, THE ASSESSEE PURCHASED ANOTHER RUBBER ESTATE WITH THE RUBBER TRE ES PLANTED THEREON. AFTER THE RUBBER TREES CEASED TO YIELD ANY FURTHER AND BECAME USELES S, THEY WERE CUT AND SOLD BY THE SSESSEE AND IT WAS HELD THAT SUCH SALE PROCEEDS WER E CAPITAL RECEIPTS AND NOT TAXABLE AS AGRICULTURAL INCOME-TAX UNDER THE KERALA AGRICULTUR AL INCOME-TAX, 1950. THIS JUDGMENT ALTHOUGH INDIRECTLY SUPPORTS THE REVENUE, BUT IT IS NOT DIRECTLY RELEVANT IN THE PRESENT CASE BECAUSE THIS JUDGMENT IS IN THE CONTEXT OF KERALA AGRICULTURAL INCOME-TAX, 1950 AND NOT IN THE CONTEXT OF INCOME-TAX ACT, 1961. 6. NOW, WE EXAMINE AND CONSIDER VARIOUS JUDGMENTS C ITED BY THE LD.AR OF THE ASSESSEE. THE FIRST JUDGMENT OF HONBLE RAJASTHAN HIGH COURT WAS RENDERED IN THE CASE OF CIT VS. VIMAL CHAND GOLE CHAND (SUPRA). THIS JU DGMENT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THIS JUDGMENT IS GIVEN IN SOME DIFFERENT CONTEXT. IN THAT CASE, THE LAND WAS PURCHASED IN 1962 AND BUILDING THEREON WAS CONSTRUCTED IN THE ACCOUNTING YEARS RELEVANT TO THREE ASSESSMENT YEARS I.E. 1968-69, 69 -70 & 70-71. THE BUILDING ALONG WITH LAND WAS SOLD IN 1970. UNDER THESE FACTS, IT WAS H ELD THAT THE CAPITAL GAINS ATTRIBUTABLE TO LAND IS ASSESSABLE AS LONG TERM CAPITAL GAINS WHERE AS THE SAME ATTRIBUTABLE TO BUILDING ONLY CAN BE ASSESSED AS SHORT TERM CAPITAL GAINS AS AGAINST ASSESSMENT OF ENTIRE CAPITAL GAINS AS SHORT TERM CAPITAL GAIN BY THE AO. SINCE, THE FACTS ARE DIFFERENT THIS JUDGMENT IS OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE. TH E SECOND JUDGMENT CITED BY THE LD.AR OF THE ASSESSEE IS THE JUDGMENT OF MADRAS HIGH COUR T IN THE CASE OF CIT VS. DR. D.L. RAM CHANDRA RAO, (SUPRA). THIS JUDGMENT IS ALSO SIMILA R TO THE JUDGMENT OF HONBLE RAJASHTAN HIGH COURT, DISCUSSED ABOVE AND IN THIS CASE ALSO IT WAS HELD THAT IF THE LAND IS HELD FOR MORE THAN PRESCRIBED PERIOD OF 36 MONTHS A ND THE BUILDING CONSTRUCTED ON IT WAS HELD FOR LESS THAN PRESCRIBED PERIOD, CAPITAL GAINS ATTRIBUTABLE TO LAND IS ASSESSABLE AS LONG ITA NO.2766/DEL./2009 (AY : 2006-07) 5 TERM CAPITAL GAINS AND THE REMAINING CAPITAL GAINS ONLY CAN BE ASSESSED AS SHORT TERM CAPITAL GAINS WHICH IS PERTAINING TO THE SUPERSTRUC TURE. THIS JUDGMENT IS ALSO OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE. THE THIRD JUD GMENT CITED BY HIM IS OF HONBLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF CIT VS. SUMAN TEA & PLYWOOD INDUSTRIES PVT. LTD. (SUPRA). IN THIS CASE, THE ISSUE IN DISP UTE WAS REGARDING THIS ASPECT AS TO WHETHER TEA BUSHES CAN BE CONSIDERED PART OF AGRICULTURAL L AND AND ON PAGE 48 OF THE JUDGMENT. IT IS OBSERVED BY THE HONBLE CALCUTTA HIGH COURT THAT THE PRINCIPAL THAT WHAT IS ATTACHED TO THE LAND BELONGS TO THE LAND IS NOT APPLICABLE IN I NDIA AND TREES WHICH STAND ON AGRICULTURAL LAND ARE NOT AGRICULTURAL LAND IN INDI A AND THEN THE TEA BUSHES CANNOT BE TAKEN TO BE AGRICULTURAL LAND IN INDIA. IT WAS HELD BY T HE HONBLE CALCUTTA HIGH COURT THAT TEA BUSHES ARE AGRICULTURAL CAPITAL ASSET. THIS JUDGME NT IS ALSO OF NO HELP TO THE ASSESSEE BECAUSE IN THIS CASE ALSO, IT WAS HELD THAT TEA BUS HES AND FOR THAT MATTER ANY TREE STANDING ON THE AGRICULTURAL LAND IS NOT AGRICULTURAL LAND I N INDIA. ANOTHER CITATION GIVEN BY THE LD.AR IS FOR A JUDGMENT SAID TO BE, RENDERED BY THE HONBLE MADRAS HIGH COURT, REPORTED IN 241 ITR 591, BUT THERE IS NO SUCH JUDGMENT AVAI LABLE ON PAGE 591 OF ITR 241. 7. NOW, WE CONSIDER THE TRIBUNALS DECISION RENDERE D IN THE CASE OF SURENDER SINGH (SUPRA). THE FACTS OF THIS CASE ARE THAT IN THAT C ASE, THE OLD MANGO TREES WERE CUT OUT FOR PROVIDING LAND FOR RE-PLANTATION OF MANGO TREES AND UNDER THESE FACTS, IT WAS THE CLAIM OF THE ASSESSEE THAT THE CUTTING AND FELLING OF OLD MA NGO TREES WERE INEXTRICABLY LINKED WITH THE PROCESS OF AGRICULTURAL PROCESS UNDERTAKEN FOR PRODUCTION O F FRUIT CROPS AND HENCE THE SALE PROCEEDS OF THE TREES WOULD AMOUNT TO REVENUE DERIVED FROM THE LAND. THE FACTS IN THE PRESENT CASE ARE DIFFERENT. IN THE PRESENT CAS E, THE ENTIRE LAND WAS SOLD OUT ALONG WITH TREES STANDING THEREON AND HENCE IT CANNOT BE SAID THAT SELLING OF TREES IN THE PRESENT CASE IS IN THE COURSE OF AGRICULTURAL OPERATION. HENCE, THIS TRIBUNAL DECISION IS ALSO NOT APPLICABLE IN THE PRESENT CASE. IN THE PRESENT CAS E, THE LAND WAS ACQUIRED BY THE DECEASED FATHER OF THE ASSESSEE ALONG WITH TREES AND PLANTS STANDING THEREON AND SUCH LAND ALONG WITH TREES AND PLANTS WERE SOLD BY THE ASSESSEE. T HE ENTIRE COST PRICE OF THIS LAND WHICH INCLUDED THE COST OF TREES AND PLANT ALSO HAS BEEN CLAIMED AS DEDUCTION AS COST OF ACQUISITION AND THE SAME WAS ALLOWED AFTER INDEXATI ON AND HENCE IT CANNOT BE SAID THAT SOME PART OF SALE PROCEEDS IS AGRICULTURAL INCOME A ND NOT CAPITAL GAINS. W, THEREFORE, ARE ITA NO.2766/DEL./2009 (AY : 2006-07) 6 OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS C ALLED FOR IN THE ORDER OF THE CIT(A) AND HENCE, WE DECLINE TO INTERFERE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. 9. ORDER PRONOUNCED IN OPEN COURT ON 26.03.2010. SD/- SD/- (R.P. TOLANI) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: MARCH 26, 2010. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A). 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT